“In truth, Brussels is a democracy-free zone. From the EU’s inception in 1950, Brussels became the seat of a bureaucracy administering a heavy industry cartel, vested with unprecedented law-making capacities. Even though the EU has evolved a great deal since, and acquired many of the trappings of a confederacy, it remains in the nature of the beast to treat the will of electorates as a nuisance that must be, somehow, negated. The whole point of the EU’s inter-governmental organisation was to ensure that only by a rare historical accident would democratic mandates converge and, when they did, never restrain the exercise of power in Brussels.”

“The problem is a relatively simple one. Greece is bridling at the unrealistic demands of the European commission and the International Monetary Fund to agree to fresh austerity measures when, as the IMF itself accepts, hospitals are running out of syringes and buses don’t run because of a lack of spare parts. […]

[They mean] that once Greece’s debt payments are excluded, tax receipts have to exceed public spending by 3.5% of GDP. The exceptionally onerous terms are supposed to whittle away Greece’s debt mountain, currently just shy of 200% of GDP.

If this all sounds like Alice in Wonderland economics, then that’s because it is. Greece is being set budgetary targets that the IMF knows are unrealistic and is being set up to fail. It will then be punished further for being unable to do what was impossible in the first place.”

“If overall private debt goes up, that doesn’t hit everyone equally. But who gets hit has very little to do with fiscal responsibility. It’s mostly about power. The wealthy have a million ways to wriggle out of their debts, and as a result, when government debt is transferred to the private sector, that debt always gets passed down on to those least able to pay it: into middle-class mortgages, payday loans, and so on.

The people running the government know this. But they’ve learned if you just keep repeating, ‘We’re just trying to behave responsibly! Families have to balance their books. Well, so do we,’ people will just assume that the government running a surplus will somehow make it easier for all of us to do so too. But in fact the reality is precisely the opposite: if the government manages to balance its books, that means you can’t balance yours.”

“The fresh dose of deflationary measures in Greece’s new €86bn (£62bn) bailout programme, agreed in July after Tsipras folded under pressure from creditors, will deepen a depression similar in its severity to those that afflicted Germany and the United States in the 1930s. The Greek economy has contracted by 29% since 2009 and is still shrinking after months of financial turmoil. Yet Greece remains part of a single currency that has emerged bloodied but intact. […]

The danger is that the austerity conditions remain fully in force and debt relief is much less generous than Tsipras is hoping for. It will require an improbably strong and rapid recovery for Greece to meet the optimistic growth and deficit reduction targets contained in its current bailout deal. As a result, the likelihood is that they will be missed, leading to pressure for further budget cuts.

What does that mean? It means that Greece will be back in the headlines for all the wrong reasons before too long. There will be talk of the need for a fourth bailout and of possible default if Greece doesn’t get one. The election is over; the economic crisis is not.”

“Tsipras must now implement a fiscal consolidation and reform programme that was designed to fail. Illiquid small businesses, with no access to capital markets, have to now pre-pay next year’s tax on their projected 2016 profits. Households will need to fork out outrageous property taxes on non-performing apartments and shops, which they can’t even sell. VAT rate hikes will boost VAT evasion. Week in week out, the troika will be demanding more recessionary, antisocial policies: pension cuts, lower child benefits, more foreclosures.

The prime minister’s plan for weathering this storm is founded on three pledges. First the agreement with the troika is unfinished business, leaving room for further negotiation of important details; second, debt relief will follow soon; and third Greece’s oligarchs will be tackled. Voters supported Tsipras because he appeared the most likely candidate to deliver on these promises. The trouble is, his capacity to do so is severely circumscribed by the agreement he has already signed.

His power to negotiate is negligible given the agreement’s clear condition that the Greek government must ‘agree with the [troika] on all actions relevant for the achievement of the objectives of the memorandum of understanding’ […]”

“[Wolfgang Schäuble’s] Greek equivalent Yanis Varoufakis, for his part, may have learned from his encounters of the third kind with the Eurogroup that the only role there was for Greece in the Europe of monetary union was that of an underfed and overregulated welfare recipient. Not only was this incompatible with Greek national pride; more importantly, what the governors of Europe would be willing to offer the Greeks by way of ‘European solidarity’ would, at best, be too little to live on. […]

Most importantly, with Greece staying in common currency, [Angela Merkel] can now reassure her core constituency, the German export industry, that none of the captive members of eurozone will ever be released, not even on probation […]

More importantly, in return for having proven themselves good Europeans by getting rid of Syriza mark I, Greeks will be hoping for above-average economic growth, clearly not of the anaemic Spanish sort currently being offered as proof for the miracles austerity can do. After a decade of misery, growth will be expected to first restore the country to its relative position before the crash and then move it on to something like European convergence. Only neoliberal economists can find this realistic, and only on condition that all their recipes are followed to the letter. That is in practice, never. […]

Not that the limits of development assistance for backward regions in a currency union with high regional disparities were unknown. Germany and Italy have experience here that is far from encouraging: Italy in the Mezzogiorno (southern) regions, Germany in its Neue Länder of the former GDR—the latter being another case of a misconceived monetary union with disastrous economic effects. Both countries are today transferring roughly 4% of their annual GDP to their poorer regions just to prevent the difference in per-capita income getting bigger.”

“But he [Greek FinMin Euclid Tsakalotos] seemed resigned and tired. And well he might be. Not only must the rescue package receive the approval of the German government and its sceptical finance minister, Wolfgang Schäuble, he must know that many of the projections he has used to convince lenders they can be repaid are based on fantasy figures. […]

If Greece is refused a third bailout and exits the euro, Britons will view the whole EU project with more contempt and be more likely to vote to leave.

But it means Europe is kicking yet another problem down the road and one that will blow up again, possibly with even more collateral damage to the world economy than it managed this year. Greece is being asked to transform a culture of weak government, corruption and bureaucratic nepotism in a matter of a few years, based on a false premise that it can mimic the productivity of its northern European partners. It can’t work.”